This award funds research in how teams make decisions that affect non-team members. In particular, the results demonstrate how individual and team decision making differ. In economics decision-makers are usually modeled as individuals, even though many real-life business and private decisions are actually made by small teams that have to come up with a joint decision after some deliberation. Understanding the impact of team decision making is therefore important for applying economic models to real world situations.
Such an impact seems especially plausible and relevant in decisions that allow for different forms of social preferences. Over the last decades, multiple experiments have demonstrated that a considerable proportion of individuals do not behave in a purely selfish way even towards complete strangers. However, there is considerable heterogeneity regarding non-selfish preferences such as altruism, inequity aversion and reciprocity in the population, with people exhibiting a range of preferences from purely selfish behavior to entirely altruistic behavior. This project is intended to bridge these two strands of research, namely team decision-making and social preferences. More specifically, the research studies the aggregation of social preferences within teams. The project is the first to systematically analyze the aggregation of social preferences within teams and the consequences of this aggregation on final outcomes of team decision-making in contrast to individual decision-making. The research uses economic laboratory experiments in which individuals and teams are exposed to simplified decision-making settings (games) and are paid according to the outcomes of those simple interactive games. Three decision-making settings, that have been extensively studied with individual decision makers, will be expanded to a team decision-making setting, thus investigating interactions among several teams and mixed interactions between individuals and teams. These games are the dictator game, the ultimatum game and a public goods game. In additions, two different formal mechanisms for making decisions within a team will be examined: a majority voting rule and a unanimity decision rule. In order to model the aggregation of social preferences within teams the project will combine existing models of social preferences with models of bargaining, where teams are bound to decide with unanimity. The aggregation process in this case is viewed as a bargaining process within a team over the amount of revealed social preferences. The proposed setup captures important aspects of many economic decisions, ranging from everyday decisions in families to strategic decisions of company boards, central bank boards, expert committees, governments, juries and many more. The research program potentially increases the external validity of existing theoretical and experimental results that adopt a representative individual assumption when studying small team decisions. It integrates research from social psychology, management and economics. Finally, it is potentially useful in giving guidance for the choice of whether to install an individual decision-maker or a small team for a specific decision-making problem in a company or an organization.
